Auto Industry
In the U.S. and around the world, the recession that started in late 2007 had a profound impact on the automobile industry. America’s car and light truck market dropped dramatically in 2008, to approximately 13.2 million units sold for the year, down by about 2.9 million from the number of units sold in 2007. In 2009, the market was much worse, with sales for the year totaling 10.4 million units. About 690,000 of those sales were made with the stimulus of a “cash for clunkers” program paid for with federal dollars. This was easily the worst year in decades for the car business, with two giant manufacturers filing for bankruptcy, GM and Chrysler, while a large number of dealerships, suppliers, parts manufacturers and other auto-related businesses also failed.
Estimates of the worldwide automobile market vary substantially from one group to another. Scotiabank Group estimated that 53.96 million new cars and light trucks would be sold globally during 2010. Analysts at R. L. Polk & Co. estimated 2009 global sales of cars and light trucks at 61.9 million, down by 5.1% over 2008.
As widely expected, GM filed for bankruptcy in mid-2009, and was promptly put back in business by a massive federal bailout. Chrysler’s significant financial problems led it to file for bankruptcy protection in April 2009. The company secured a large federal bailout and new financing from the U.S., Canadian and Ontario governments. This enabled it to quickly emerge from bankruptcy in a new structure with help from Italian carmaker Fiat, which initially owns about 20% of Chrysler. Fiat will have the right to earn additional shares in the company if certain goals are met, which could lead to Fiat owning a controlling stake. Labor unions received significant stakes in both GM and Chrysler as part of their reorganization. Outside of the U.S., Toyota received some financing from the Japanese government, and car makers throughout Europe and Asia were seeking concessions and/or financial aid.
Analysts at RL Polk expected 2010 car and light truck sales in the U.S. to total approximately 11.5 million units.
The biggest upward trend in auto sales for 2009 and 2010 was in China, where government stimulus helped dealers to sell about 13.6 million units in 2009 and an expected 14 million in 2010. China has become the world’s largest car market, and RL Polk expects it to hit 17.5 million units in 2015.